November 12, 2007

 

Outside markets to influence US 2007/08 grains

 

 

Small reductions in US corn and soy yields trimmed output in Friday's US Department of Agriculture's November crop production report and should give a modest boost to futures prices, although happenings in the outside markets will also influence trade, one analyst said.

 

The USDA said the 2007/08 US corn crop is estimated at 13.168 billion bushels in its November estimate. Analysts expected 13.261 billion and in October USDA said the size was 13.318 billion. Output for 2006 was 10.535 billion. Yield was reduced to 153.0 bushels per acre from 154.7 bushels in October. The USDA said the 2007/08 US soy crop is estimated at 2.594 billion bushels in its November estimate. Analysts expected 2.6406 billion and in October USDA said the size was 2.598 billion. Output for 2006 was 3.188 billion.

 

Soy yield was sliced to 41.3 bushels per acre, down from 41.4 a month ago and under the estimate of 41.5.

 

Early calls for Chicago Board of Trade corn and soy futures are for 3 to 5 cents a bushel rise. Wheat is called to open steady to 2 cents lower.

 

Yields for corn and soy fell modestly, likely because of declines in western and southern states, said Peter Georgantones, president of Investment Trading Services. However, Georgantones said, with a 13-billion-bushel-plus corn production, the cut in output is not worrisome. He spoke at a Minneapolis Grain Exchange sponsored press briefing.

 

Ending stocks for the 2007/08 corn marketing year were 1.897 billion bushels, above the 1.932 billion-bushel trade estimate. In October, USDA estimated carryout at 1.997 billion.

 

"Carryout is not tight by any stretch of imagination. With the shift in acreage from corn to beans and wheat, the market is concerned (about retaining acreage) and will do its part in holding a high enough price to keep corn acres in line and give farmers an incentive to plant corn. I don't see a significant (price) break," he said.

 

The USDA lowered feed and residual use to 5.650 billion from 5.7 billion, a surprise, he said, given the huge hog slaughters recently.

 

Ending stocks for the 2007/08 soy marketing year were 210 million bushels, under the 213 million-bushel trade estimate, and down from the October estimate of 215. The balance sheet was left essentially unchanged.

 

"This explains why we have US$10.50 (CBOT) beans. The market is doing its part that we stay high enough to increase acreage. Brazil is off to a good start. With a 210 (million bushel) carryout we must ensure that we plant many more acres to replenish it," Georgantones said.

  

Wheat

 

Wheat ending stocks were at 312 million bushels, above the trade estimate of 294 million, and above than the October figure of 307 million. Exports were left unchanged to 1.150 billion. The USDA increased imports by 5 million bushels to 90 million.

 

Thursday's USDA weekly export sales report showed cancellations of wheat purchases due to the drop in wheat prices from the all-time highs set in the fall.

 

"We will see more cancellations of wheat if market keeps subsiding. I don't know if there will be a ton of cancellations as countries need it. Wheat could fall another 30-40 cents (from current December levels) and have a support area. But the market is very volatile and if the business comes in you'll see it snap back quickly," he said.

 

Old-crop wheat could see pressure from export business cancellations but he said new-crop will be sustained due to some issues over dryness in western hard red winter wheat regions. "They could use a drink," he said.

 

Looking outside of the influence of the report, the dollar weakness is supportive to grain markets as dollar-denominated grain is cheaper for importers to buy. However, he said, a looming problem will be freight costs. If energy prices remain at near $100 a barrel levels that could limit exports of grain and that would cause prices to tumble.